Pilbara Pulse 2014 - Macroplan Dimasi - Brian Haratsis

Pilbara Pulse 2014| 23 July 2014

Pilbara Cities

Presented by Brian HaratsisWednesday 23 July 2014

Halfway There or a long Way to Go?

One day Alice came to a fork in the road and saw a Cheshire cat in a tree. “Which road do I take?” she asked. “Where do you want to go?” was his response. “I don't know,” Alice answered. “Then,” said the cat, “it doesn't

matter.”- Lewis Carroll, Alice in Wonderland


Pilbara Cities Region

Canning Basin


Future Role of North West¢ Integrating economies

of Pilbara and Kimberley with the Mid West

MID WEST

PILBARA

KIMBERLEY

•Integrated economies

•Floating construction workforce

•Supporting service sector

•Movement of goods

3


Pilbara Cities Vision (2009): Key Objectives

Population Base (2011) 2035 (Vision target

date)Vision Targets

Pilbara Region Total 59,894 ? 130,000 Karratha 16,476 ? 50,000 Port Hedland 4,393 ?South Hedland 9,375 ?Newman 5,478 ? 15,000 Tom Price 5,460 ? 8,000 Onslow 667 ? 2,000

50,000


Key Programs Specified in Vision¢ Infrastructure Co-ordination

¢ Land Availability

¢ Community Projects

¢ Economic Diversification


Pilbara Vision: Broader Objectives Context

¢ Attractive and sustainable communities

¢ Port of Port Hedland 247 Mt ($40Bn) to 500 Mt

¢ Advanced Projects ($107 Bn)

¢ Further Projects ($194Bn)

¢ Value of Minerals and energy produced (2018 est) $211Bn


Pilbara Vision; Potential Objectives¢ Attractive - (Population growth/ length of stay/ education

level)¢ Sustainable

© Economic – business growth, Gross regional Product, employment/ FiFo)

© Social – health, education© Environmental – Compliance

¢ Other – (Regional/ Global Competitiveness)


ABS Measures of Progress


Regional Cities Victoria Growth Framework

¢ To cater for an expected population of 1,030,500 residents by 2031, Regional Cities Victoria partnered with the Victorian Government and Macroplan to develop the Regional Cities Growth Strategy (RCGS) framework.

¢ The framework provides a consistent guide to regional growth planning as well as a comprehensive planning tool that will assist Regional Cities make informed decisions on the services and infrastructure that they need to continue to offer highly-livable and productive cities.


Regional Cities Victoria Growth FrameworkThis Chart outlines the factors taken under consideration by RCV and Macroplan in their analysis


Regional Cities Victoria Growth FrameworkThe following is a summary of the key messages outlined in the report:1. Not all Regional Cities are the same – they function in unique ways, grow organically and respond differently to a variety of economic and

market forces.2. A framework is needed for defining and measuring the many and varied determinants of change across all Regional Cities to inform

decision making about future priorities for growth and funding decisions.3. The Growth Framework presented in this study provides a logical pathway for interpreting various determinants of change as well as key

focus areas for investment and policy action to achieve sustainable growth:v Primary, secondary and tertiary measures of activity and performance are identified in the Growth Framework for measuring current

activity and establishing how Regional Cities will grow in the futurev The historic context, size and structure of regional economic systems is identified as important as this defines the role of key variables

and future growth potential of Regional Citiesv The relative position of a Regional City in the business cycle, including local and international economic contexts is important for

targeting actions at capacity building initiatives and/or future-proofing actions4. Understanding the broad characteristics of each Regional City having regard to a wide range of variables, is important for establishing

common themes, strengths, weaknesses, opportunities and threats now and in the future.5. Clearly defining the economic value chain that underpins Regional Cities is critical in understanding future priorities for investment and

State and Local Government policy/regulatory actions.


Regional Cities Victoria Growth Framework6. The Growth Framework focuses on those variables in the value chain which may be influenced directly and indirectly through investment

and policy actions to facilitate growth among Regional Cities over time, namely:

v Economic Value & Scalability

v Land, Infrastructure & Natural Systems

v Community Infrastructure & Services

v Environmental Sustainability

7. The Growth Framework identifies specific investment and policy related actions or drivers which may be used to influence these variables directly and indirectly at the Regional City level, including:

v Investment – public, private and not-for profit

v Policy and regulatory actions – international, national, state and regional

8. The Diagnostics Tool comprises four assessment themes mapping to the Growth Framework and establishes Regional City aspirations addressing primary, secondary and tertiary indicators.

9. Upon completion of regional diagnostics analysis using the Diagnostics Tool, an individual Regional City will be able to clearly identify areas for strategic action in order to achieve its future aspirations.

10. The Growth Framework and Diagnostics Tool identified in this study will greatly assist in developing Regional Growth Plans.


Key Complexity: Extreme Cyclical Volatility in WA

% Growth Growth No.Western Australia (June 2012) 3.4% 79,000

Recent Peak Growth (2012) 3.4% 79,000

Recent Low Growth (2004/05) 1.6% 32,000

Decade Low Growth (2001/02) 1.2% 22,000

Australia Current Growth (2012) 1.7% 370,000

Australia Peak Growth (2009) 2.1% 442,500


Cyclical population equation¢ WA’s Net Interstate Migration position has been

dependant on the economic cycle

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

1996

-97

1997

-98

1998

-99

1999

-200

0

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13


Measuring Progress

1. Inputs – assess completion of major projects

2. Outputs – assess outcomes of investment

¢ How to set benchmarks?


Measuring Progress: Inputs¢ money spent is not the best

measure of success

Type of projectGovernment Commitment

($M)

Project Cost($M)

Additional / improved accommodation 133.9 225.4Additional development potential 206.7 208.1Improvde / additional economic infrastructure 293.7 440.7Improved / expanded community facilities 165.7 194.9

Port Hedland Total 800.0 1,069.1

Investment Year of completion Government Commitment ($M)

Project Cost($M)

East End Urban Village (planning due dilligence) ? 1.2 ?

Waste Water Treatment Plant (relocation of Port Hedland & Upgrading South Hedland) 2014 118.0 118.0

Community Centre & Library (study and desing) 0.7 1.4

Multi-purpose Recreation Centre 2012 11.1 34.1

Osprey Service Worker Accommodation 2013 20.5 91.0

South Hedland High School upgrade 2013 13.4 17.4

Town Centre Revitalisation 2013 77.0 77.0

South Hedland Bowling Club upgrades 2.5 4.0

Mairnutharntu Maya apprentice hostel 2014 8.0 19.0

Hedland Service Worker Intervetion Package 2013 93.4 93.4

Kariyarra Mugarinya Joint Venture Housing Development 2014 12.0 22.0

Hedland Health Campus 2010 138.0 138.0

South Hedland Underground Power Project (under PUPP) 2014 32.2 43.0

South Hedland Site and Transmission Works; Power Station 2014-15 117.0 138.0

Port Hedland water study (under WCBS Project) 12.0 20.0

PHPA Main Street Jetty Project 7.5 9.7

Wedge Street upgrade 2013 2.6 5.2

Port Hedland Infill Sewerage Program 2012 7.9 7.9

Marina development 2016-17 112.0 152.0

Utah Point 2010 120.0 225.0

Pilbara Maritime Common User Facility Feasibility Study (Lumsden Point) 2013 5.0 5.0

Port Hedland Total 912.0 1,221.1


Housing Market Analysis: Port Hedland / South Hedland

Source: Western Australia Planning Commission, MacroPlan.

Table 5 – Apparent gross yield (based on advertised rents and sales as at March 2014)Gross yield (% pa)

Port Hedland South Hedland

One bedroom 7.40% 7.32%

Two bedroom 9.35% 8.87%

Three bedroom 7.30% 8.30%

Four bedroom & larger 9.94% 10.37%

Median sale price

Medianrent

Gross rental yield

Capital CitiesSydney $610,000 $458 3.90%Melbourne $515,000 $337 3.40%Brisbane $445,000 $402 4.70%Perth $514,000 $425 4.30%

Regional Port Hedland $1,010,000 $1,460 7.52%South Hedland $610,000 $1,300 11.08%Karratha $690,000 $940 7.08%Onslow $910,00 $1,900 10.86%

Table 6 – Gross rental yields comparison (based on advertised rents and sales as at March 2014)

Source: Western Australia Planning Commission, RP Data (March 2014), MacroPlan.

Sydney, 3.90%

Melbourne, 3.40%

Brisbane, 4.70%

Perth, 4.30%

PortHedland,

7.52%

SouthHedland, 11.08%

0%

2%

4%

6%

8%

10%

12%

Gro

ss re

ntal

yie

ld

Residential market summary | Port Hedland

• The residential market in Port Hedland remains strongindicating a high level of demand despite the windingdown of some projects and a shift in employment fromconstruction to operations.

• Prices, rents and yields have all eased from the peaks of2012, however, these all remain high, particularly whencompared to other areas.


Housing Market Analysis: Karratha

Source: Western Australia Planning Commission, MacroPlan.

Gross yield (% pa)

Karratha

One bedroom 6.99%Two bedroom 7.32%Three bedroom 6.96%Four bedroom & larger 8.26%

Table 7 – Apparent gross yield (based on advertised rents and sales as at March 2014)

Median sale price

Medianrent

Gross rental yield

Capital CitiesSydney $610,000 $458 3.90%Melbourne $515,000 $337 3.40%Brisbane $445,000 $402 4.70%Perth $514,000 $425 4.30%

Regional Port Hedland $1,010,000 $1,460 7.52%South Hedland $610,000 $1,300 11.08%Karratha $690,000 $940 7.08%Onslow $910,00 $1,900 10.86%

Table 8 – Gross rental yields comparison (based on advertised rents and sales as at March 2014)

Source: Western Australia Planning Commission, RP Data (March 2014), MacroPlan.

Sydney, 3.90%

Melbourne, 3.40%

Brisbane, 4.70% Perth, 4.30%

Karratha, 7.08%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Gro

ss re

ntal

yie

ld

Residential market summary | Karratha

• The residential market in Karratha has declined in thepast few years indicating a low level of demand after theshift in employment from construction to operations.

• Prices, rents and yields have all eased from the peaks of2012, with a 30 per cent drop in dwelling prices.However, these all remain high, particularly whencompared to other areas.


Measuring Progress: Outputs

Source: Mackenzie (2011); BREE (2013); Hurst (2013).



Measuring Progress: Outputs


Measuring Progress: Outputs¢ Backcasting/forecasting

© Understanding Growth Patterns

Expectation Reality

Prog

ress

Prog

ress

TimeTime


Measuring Progress: Outputs¢ Comparison With Other Regions/ Regional Towns

© Gap Analysis

¢ Forecasting

© Population

© Capital expenditure

© Output


Pilbara Development Timeline1950 Townsite of Wittenoom gazetted Wittenoom1952 Lang Hancock flies over the Pilbara region1960 Australian Government changes restrictions on iron-ore exports Australia wide1961 West Australian government announces that iron-ore exploration permits will be allowed Western Australia1962 CRA geologists identify Mount Tom Price deposits Mount Tom Price1964 Oil was discovered in commercial quantities by West Australian Petroleum Pty Ltd Barrow Island

Dampier and Mount Tom Price - construction commences at locationsConstruction commences on the town of Goldsworthy Goldsworthy

Dampier - Tom Price railway works commence Hamersley IronAsbestos mine closed at Wittenoom Gorge]] Wittenoom

Rio Tinto open their first Iron Ore mine in the Pilbara Mount Tom Price mineTom Price to Dampier - first fully loaded ore train

Dampier - first shipment of ore loadedIron ore discovered at Mount Whaleback Newman

Hamersley Holdings Limited shares on the ASX1968 BHP Billiton establish an Iron Ore mine near Newman Mount Whaleback1969 Developments of community at Karratha begin1970 East Intercourse Island connected by causeway1971 Townsite of Wickham gazetted Wickham

Cape Lambert port opened Cape LambertTownsite of Newman gazetted Newman

Townsite of Paraburdoo gazetted ParaburdooTownsite of Pannawonica gazetted Pannawonica

Dampier Salt commences operations Dampier1974 North West Coastal Highway from Geraldton, Western Australia to Port Hedland completely sealed1975 Cyclone Joan - flooding in Pilbara and damages Hamersley Rail1977 Tom Price, Paraburdoo, Dampier and Karratha combined population passes 15,0001978 Meektharra to Newman section of Great Northern Highway upgraded. Great Northern Highway

1965

1966

1967

1972

Date Event Location


Pilbara Development TimelineDate Event Location

1981 WAPET discover gas off the Pilbara coast with the drilling of the Gorgon 1 well Gorgon gas project1983 Karratha Airport opens Karratha1984 North Rankin A Gas Platform commissioned North West Shelf1989 Newman to Port Hedland section of Great Northern Highway upgraded. Great Northern Highway1989 BHP Billiton open Iron Ore mine near Newman Jimblebar mine1990 Rio Tinto Group opens Iron Ore mine in Hamersley Range Channar mine1992 Rio Tinto opens another Iron Ore mine in Hamersley Range Brockman 2 mine1993 BHP Billiton open another Iron Ore mine near Shay Gap Yarrie mine1994 Rio Tinto opens another Iron Ore mine in Hamersley Range Marandoo mine1995 Goodwyn A Gas Platform commissioned North West Shelf2001 Broken Hill Proprietary Company Limited and Billiton plc merge to form BHP Billiton2004 Rio Tinto opens another Iron Ore mine in Hamersley Range Eastern Range mine2006 Gold Mine opens near Whim Creek and is closed in 2008 Indee Gold Mine

Rio Tinto open another Iron Ore mine in Hamersley Range Hope Downs mineTownsite of Wittenoom officially abolished by gazettal Wittenoom

Fortescue Metals Group commence mining Iron Ore in the Chichester Range Cloud Break mine2008 First train runs on Fortescue railway Fortescue railway2009 Pilbara Cities Vision Launched Pilbara2009 Fortescue Metals Group open new Iron Ore mine in the Chichester Range Christmas Creek mine2010 Rio Tinto open another Iron Ore mine in Hamersley Range Brockman 4 mine2011 The Woodside Pluto project begins producing LNG Woodside2012 Boolgeeda Airport is an airport serving the Brockman 4 mine opens Brockman 4 mine2013 Fortescue Metals Group opens its third mine Soloman Hub

BHP Billiton’s opens another iron ore mine at Jimblebar mine Jimblebar mineAtlas Iron officiallys open its fifth mine Mt Webber Mine

2007

2014


Backcasting: Adapting to Structural Change

¢ Start-Up (1960-1995) – Initial Investment (Japanese underpin)

¢ Major Periods of Stagnation (1995-2006)

¢ International Competition (Brazil/ Vale) 1995-2015

¢ Globalisation (Baosteel/ Aurizon) 2015-2035


Measures of Progress¢ Pilbara Vision

¢ Major Investment

¢ Housing Prices

¢ FiFo

¢ Other critical issues


Measures of Progress¢ High Indigenous income in mining


Competitive PilbaraTheme of Comparison Pilbara's Rank Amongst

Regions

Institutions 15

Infrastructure and Essential Services 52

Economic Fundamentals 1

Human Capital 55

Labour Market Efficiency 11

Technological Readiness 23

Business Sophistication 45

Innovation 24

Market Size 51

Natural Resources 3Source: Insight – Regional Australia Institute


Regional Key Data: ABS¢ Data tracked in regions


Pilbara Population Growth¢ Pilbara Population, Stacked by SA2, 2003-2013

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Ashburton (WA) East Pilbara Karratha Newman Port Hedland Roebourne South Hedland


Pilbara Population Growth

Current population

Population target 2035

Required growth rate 2013-35

Growth rate 2003-2013

Population in 2035 if Current

growth rates continue

Population target

shortfall

Port and South Hedland 15,125 50,000 5.3% 1.9% 23,319 26,681

Karratha 18,945 50,000 4.3% 4.7% 54,484 -4,484

Newman 6,099 15,000 4.0% 4.1% 15,368 -368


Conclusion¢ Pilbara success requires better measures of progress

¢ Reached a new ‘floor’ in Pilbara Growth

¢ Next cycle will include slower growth plateau but average population growth over the period likely to be significant


Conclusion¢ Key Infrastructure Investment Phase (2015-2025)

© WHERE WOULD WE LIKE TO GO?

¢ Key Trigger Point - City building/Regional Economic Diversification (2025-2030)

© Karratha Population @ 30-35,000

© Port Hedland + South Hedland Population @ 20-25,000


The Port of Port Hedland¢ The PHPA Continues to Break Export Records

ALSO KARRATHAASK DIMASI RE RETAIL SPENDNUMBER OF NEW BUSINESSES (SEE ABS)


Mining Australia – commodity prices


Economics Australia – business sector


West Australian Capital InvestmentCapital Expenditure by Industry, Quarterly

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Jun-

1989

Feb-

1990

Oct

-199

0

Jun-

1991

Feb-

1992

Oct

-199

2

Jun-

1993

Feb-

1994

Oct

-199

4

Jun-

1995

Feb-

1996

Oct

-199

6

Jun-

1997

Feb-

1998

Oct

-199

8

Jun-

1999

Feb-

2000

Oct

-200

0

Jun-

2001

Feb-

2002

Oct

-200

2

Jun-

2003

Feb-

2004

Oct

-200

4

Jun-

2005

Feb-

2006

Oct

-200

6

Jun-

2007

Feb-

2008

Oct

-200

8

Jun-

2009

Feb-

2010

Oct

-201

0

Jun-

2011

Feb-

2012

Oct

-201

2

Jun-

2013

Mining Manufacturing Other

$ M

illio

ns


ResourcesNumber of Advanced Projects - Australia

Source: BREE Resources and Energy Major Projects April 2014


Region and Town Comparison¢ Population growth rates, Pilbara SA2s, 2004-2013

Karratha NewmanPort

Hedland RoebourneSouth

Hedland Ashburton East

PilbaraPilbara

SA32004 6.0% 7.1% -3.4% 3.9% 0.8% 7.1% 10.7% 4.4%2005 5.9% 8.4% -3.4% 3.8% 1.0% 4.9% 9.6% 4.2%2006 7.0% 8.6% -1.6% 4.6% 2.2% 4.8% 9.3% 5.1%2007 2.4% 2.3% -0.5% 3.2% 0.7% 4.4% 18.0% 3.5%2008 3.0% 2.3% 1.8% 3.4% 3.3% 6.8% 17.6% 4.9%2009 3.3% 3.1% 3.7% 4.3% 4.5% 6.2% 16.0% 5.4%2010 3.3% 1.6% 3.0% 1.9% 3.6% 5.6% 10.0% 4.1%2011 4.6% 0.6% 4.5% 4.1% 2.4% 7.5% 9.5% 4.9%2012 5.5% 4.8% 2.3% 2.5% 3.0% 4.1% 2.5% 3.9%2013 5.6% 2.2% 1.5% 2.5% 2.9% 2.9% 2.1% 3.3%


Region and Town ComparisonPilbara Bundaberg Hervey Bay Mildura Shepparton Bunbury

Western Australia Australia

2004 4.4% 1.9% 6.0% 0.3% -0.2% 1.9% 1.4% 1.1%2005 4.2% 2.4% 4.9% 0.6% -0.1% 3.5% 1.6% 1.2%2006 5.1% 2.4% 4.8% 1.1% 0.6% 3.4% 2.0% 1.4%2007 3.5% 2.0% 4.6% 0.6% 1.0% 1.3% 2.7% 1.8%2008 4.9% 2.4% 4.1% 0.6% 1.3% 3.1% 3.1% 2.0%2009 5.4% 1.8% 3.6% 0.5% 1.7% 3.3% 3.2% 2.1%2010 4.1% 1.2% 2.2% 0.5% 1.3% 2.4% 2.3% 1.6%2011 4.9% 0.7% 1.2% 0.4% 0.8% 2.4% 2.7% 1.4%2012 3.9% 1.4% 1.5% 0.7% 1.0% 3.1% 3.6% 1.7%2013 3.3% 0.6% 1.2% 0.9% 0.7% 2.9% 3.3% 1.8%

Average Growth Rate 2004-2013

4.4% 1.7% 3.4% 0.6% 0.8% 2.7% 2.6% 1.6%


Region and Town Comparison


Measuring Progress: Setting Criteria¢ 2015-2025 – Infrastructure Phase

© Projects

© Market Gaps

© Facility Gaps

¢ Post 2030 - Economic Diversification Phase© Business Openings

© Service sector jobs

© Gross regional Product

© Sector specialisation (e.g. Maritime Services, Mechanical engineering, Port management and development)

© Sustainable employment and population

© Global Networks

© Basic Infrastructure


Projected Employment Growth Across Northern Regional WA 2012-2017

1.91.8

1.51.4

1.11.0

1.00.9

0.80.7

0.70.4

0.10.1

0.00.0

0.00.0

-0.2

-0.5 0.0 0.5 1.0 1.5 2.0

Health Care and Social AssistanceConstructionRetail TradeEducation and TrainingProfessional, Scientific, Technical ServicesTransport, Postal and WarehousingManufacturingMiningAgriculture, Forestry, FishingWholesale TradeOther ServicesAccommodation and Food ServicesRental, Hiring and Real Estate ServicesFinancial and Insurance ServicesArts and Recreation ServicesPublic Administration and SafetyAdministrative and Support ServicesElectricity, Gas, Water, Waste ServicesInformation Media, Telecommunications

Employed Persons ('000s)


X Factors¢ Australia becomes moderate world power in energy, minerals and

defence, Pilbara becomes critical¢ From FiFo to local work forces¢ Emerging markets/growth in Asian middle class stimulates faster

growth¢ Karratha International Airport becomes the northwest hub airport¢ Federal Government develops rational ‘Develop the North’ policies¢ Pilbara services major Kimberley expansion¢ Marine services hub emerges


Thank you.

Presentations & Public Speaking

Pilbara Pulse 2014 - Macroplan Dimasi - Brian Haratsis